What is Gross Value Added ?
- The term that is used to denote the net contribution made by a firm is called its value added
- The raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’.
Value added of a firm = value of production of the firm – value of intermediate goods used by the firm.
- Gross value added (GVA) is defined as the value of output less the value of intermediate consumption.
- Value added represents the contribution of labor and capital to the production process.
- When the value of taxes on products (less subsidies on products) is added, the sum of value added for all resident units gives the value of gross domestic product (GDP).
- Thus, Gross value added (GVA) = GDP + subsidies on products – taxes on products